Mumbai: The Bombay high court has held that the Income Tax (IT) department cannot cancel the registration of an organisation’s financial licenses merely because it did not pay taxes on receipts and expenditures that were meant to benefit the members of the organisation in the form of newsletters, subscriptions and so on.

The organisation had complained that the IT department, had arbitrarily cancelled the organisations registration even though the receipts were not in the course of trade.

A division bench of was hearing an appeal filed by the IT department against an order of the Income Tax Appellate Tribunal wherein it had set aside the cancellation of the registration of the Builders Association of India.

The association had argued that the receipts were not for the purpose of business but “were on account of subscription of members, holding exhibitions, for its members etc. Thus, not an activity carried out for outsiders for commercial purposes.” Based on these findings the tribunal had set aside the cancellation of registration order passed by the IT department.

The court accepted the arguments as the counsel for the revenue section of the IT department also admitted that the decision of the tribunal was not contrary to previous orders of the HC.